Recording of Transactions-I

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After studying this chapter, you will be able to: • describe the nature of transaction and source documents; • explain the preparation of accounting vouchers; • apply accounting equation to explain the effect of transactions; • record transactions using rules of debit and credit; • explain the concept of book of original entry and recording o f transactions in journal; • explain the concept of ledger and posting of journal entries to the ledger accounts.

n chapter 1 and 2, while explaining the development and importance of accounting as a source of disseminating the financial information along with the discussion on basic accounting concepts that guide the recording of business transactions, it has been indicated that accounting involves a process of identifying and analysing the business transactions, recording them, classifying and summarising their effects and finally communicating it to the interested users of accounting information. In this chapter, we will discuss the details of each step involved in the accounting process. The first step involves identifying the transactions to be recorded and preparing the source documents which are in turn recorded in the basic book of original entry called journal and are then posted to individual accounts in the principal book called ledger. 3.1 Business Transactions and Source Document

After securing good percentage in your previous examination, as promised, your father wishes to buy you a computer. You go to the market along with your father to buy a computer. The dealer gives a cash memo along with the computer and in exchange your father makes cash payment of Rs. 35,000. Purchase of computer for cash is an example of a transaction, which involves reciprocal exchange of two things: (i) payment of cash, (ii) delivery of a computer. Hence, the transaction









Transaction Voucher Name of Firm : Voucher No : Date : Debit account : Credit account : Amount (Rs.) : Narration :

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Authorised By : Prepared By : Fig. 3.1 : Showing specimen transaction voucher

3.1.1 Preparation of Accounting Vouchers

Accounting vouchers may be classified as cash vouchers, debit vouchers, credit vouchers, journal vouchers, etc. There is no set format of accounting vouchers. A specimen of a simple transaction voucher is used in practice is shown in figure 3.1. These must be preserved in any case till the audit of the accounts and tax assessments for the relevant period are completed. Now a days, accounting is computerised and the necessary accounting vouchers showing the code number and name of the accounts to be debited and credited are prepared for the purpose of necessary recording of transactions. A transaction with one debit and one credit is a simple transaction and the accounting vouchers prepared for such transaction is known as Transaction Voucher, the format of



involves this aspect, i.e. Give and Take. Payment of cash involves give aspect and delivery of computer is a take aspect. Thus, business transactions are exchanges of economic consideration between parties and have two-fold effects that are recorded in at least two accounts. Business transactions are usually evidenced by an appropriate documents such as Cash memo, Invoice, Sales bill, Pay-in-slip, Cheque, Salary slip, etc. A document which provides evidence of the transactions is called the Source Document or a Voucher. At times, there may be no documentary for certain items as in case of petty expenses. In such case voucher may be prepared showing the necessary details and got approved by appropriate authority within the firm. All such documents (vouchers) are arranged in chronological order and are serially numbered and kept in a separate file. All recording in books of account is done on the basis of vouchers.



Recording of Transactions - I


which is shown in figure 3.1. Voucher which records a transaction that entails multiple debits/credits and one credit/debit is called compound voucher. Compound voucher may be: (a) Debit Voucher or (b) Credit Voucher; the specimen is shown in figure 3.2.
Debit Voucher Name of Firm : Voucher No : Credit Account : Amount : Debit Accounts S. No. Code Account Name Amount Rs. Date :

Narration (i.e. Explanation)

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Authorised By : CreditVoucher Name of Firm : Voucher No : Debit Account : Amount : Credit Accounts Amount Rs. S. No. Code Account Name Authorised By : Fig. 3.2 : Showing debit and credit vouchers

Prepared By : Date : Narration (i.e. Explanation) Prepared By :






Transactions with multiple debits and multiple credits are called complex transactions and the accounting voucher prepared for such transaction is known as Complex Voucher/ Journal Voucher. The format of a complex transaction voucher is shown in figure 3.3.
Name of Firm : Voucher No : Debit Accounts S. No. Code Account Name Amount Rs. Date :

Narration (i.e. Explanation)

Credit Accounts S. No. Code Account Name Amount Rs.

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Authorised By :

Fig. 3.3 : Showing specimen of complex transaction voucher

The design of the accounting vouchers depends upon the nature, requirement and convenience of the business. There is no set format of an accounting voucher. To distinguish various vouchers, different colour papers and different fonts of printing are used. Some of the specimen of the accounting vouchers are given in the earlier pages. A accounting voucher must contain the following essential elements : • It is written on a good quality paper; • • Name of the firm must be printed on the top; Date of transaction is filled up against the date and not the date of recording of transaction is to be mentioned; The number of the voucher is to be in a serial order; Name of the account to be debited or credited is mentioned;

• •

Prepared By :

Narration (i.e. Explanation)




Journal Voucher

Recording of Transactions - I


• • • •

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The above equation can also be presented in the following forms as its derivatives to enable the determination of missing figures of Capital(C) or Liabilities(L). (i) A – L = C (ii) A – C = L Since, the accounting equation depicts the fundamental relationship among the components of the balance sheet, it is also called the Balance Sheet Equation. As the name suggests, the balance sheet is a statement of assets, liabilities and capital.

At any point of time resources of the business entity must be equal to the claims of those who have financed these resources. The proprietors and outsiders provide the resources of the business. The claim of the proprietors is called capital and that of the outsides is known as liabilities. Each element of the equation is the part of balance sheet, which states the financial position of the business on a particular date. When we analyse the transactions, we actually try to know that how balance sheet of a business entity gets affected. Asset side of the balance sheet is the list of assets, which the business entity owns. The liabilities side of the balance sheet is the list of owner’s claims and outsider’s claims, i.e., what the business entity owes. The equality of the assets side and the liabilities side of the balance sheet is an undeniable fact and this justifies the name of accounting equation as balance sheet equation also.


Accounting equation signifies that the assets of a business are always equal to the total of its liabilities and capital (owner’s equity). The equation reads as follows: A=L+C Where, A = Assets L = Liabilities C = Capital



3.2 Accounting Equation


Debit and credit amount is to be written in figures against the amount; Description of the transaction is to be given account wise; The person who prepares the voucher must mention his name along with signature; and The name and signature of the authorised person are mentioned on the voucher.

Analysis of transaction: This transaction increases plant and machinery (assets) by Rs. 3. Bought plant and machinery for the business for Rs.000.000 5. 60. the resources of this business entity is in the form of cash..00. 4. We will now analyse the transactions listed in example 1 and its effect on different elements and you will observe that the accounting equation always remain balanced: Opened a bank account in State Bank of India with an amount of Rs.000 as Capital . Sources of this business entity is the contribution by Rohit (Proprietor) Rs. 1. Rs. the business has not yet started its activities and has not earned any profits.e.00.46 Accountancy Books of Rohit Balance Sheet as at . If we put this information in the form of equality of resources and sources.000. if business suffers any losses..... 2.000 5.25.000 and increases liabilities (M/s Ramjee lal as creditor) by Rs.. 10.. Bought furniture for Rs.000 he Amount Rs. it will decrease the invested amount in business. On the other hand. 5. Liabilities Capital Amount Rs..000. 5.000 and cheque was issued on the same day. 4.000.00. Since. In case any profits are earned.00. 1. throughout the chapter) .15.000 Assets Cash in hand © no N C tt E o R be T re pu Example 1.000. Rohit started business with a capital of Rs. Analysis of transaction: This transaction increases furniture (assets) and decreases bank (assets) by Rs. 5. 5. In the above balance sheet.80.00. 10. For example.000.80.000. 60.00. From the accounting point of view.. it will increase the invested amount in business. (For the purpose of understanding we will refer this example as example 1. 1. the picture would emerge somewhat as follows: d . the total assets are equal to the liabilities of the business. bl is in cash is paid to M/s Ramjee Lal. Analysis of transaction: This transaction increases the cash at bank (assets) and decreases cash (asset) by Rs.00. decreases cash by Rs.000 and an advance of Rs. 1.25. 5.. the amount invested in business is still Rs. i.

000 30.20.000 + Rs. The final equation as per the above analysis table can be summarised in the form of a balance sheet as under: Balance Sheet as at. 35. 5. In its simplest form.80.000 5. © no N C tt E o R be T re pu 6. 35.4). In double entry accounting.). the left side is called debit (often abbreviated as Dr. 25..3 Using Debit and Credit As already stated every transaction involves give and take aspect. 55.000 60. if it is an account of a customer all goods sold shall appear on the left (debit) side of customer’s account and all payments received on the right side.000 = Rs.. this simple form called a T-account (refer figure 3. an account looks like the letter T..000. In a T account.80.000 4.000 In terms of accounting equation A=L+C Rs. Analysis of transaction: This transaction decreases stock of goods (assets) by Rs. 25. every transaction affects and is recorded in at least two accounts. the total amount debited must equal to the total amount credited.80. the terms — debit and credit indicate whether the transactions are to be recorded on the left hand side or right hand side of the account. Notice that the T format has a left side and a right side for recording increases and decreases in the item. The difference between the totals of the two sides called balance shall reflect the amount due to the customer.I 47 4.000) d .000 35.000 Assets Amount Rs.000. This helps in ascertaining the ultimate position of each item at the end of an accounting period.10. 1. Because of its shape.000 and increases assets (Rajani Enterprises as debtors Rs.70. 55. 1.000 he Goods purchased from M/s Sumit Traders for Rs.25.) and the right side is known as credit (often abbreviated as Cr.000.Recording of Transactions .000) and capital (with the profit of Rs.000 6.70.10. For example.2010 Liabilities Outsider’s Claims (Creditors) Capital Amount Rs. When recording each transaction. In accounting. Analysis of transaction: This transaction increases goods (assets) and increases liabilities (M/s Sumit Traders as creditors) by Rs. 6. Goods costing Rs.. 5.000 sold to Rajani Enterprises for Rs.000 Cash Bank Debtors Stock Furniture Plant & Machinery 3. To bl is 10. 10.000 1.

000 60. 5...000 ...000 1.000 Equation 2.000 (25.000 Equation 4..00.000) Post Trans. (4.000 35.000 55. 20.000 ..000 Total 5.000 6..80.15.000 5.10.....48 The summary of effects of transactions on accounting equation is in the following analysis table: (Figures in rupees) Total Assets 5.15..000 1...000 4..80..000 1.000 4.000 6.000 .000 Transaction No.. 5.000 ..000 55. 20....000 .80.000 5..000 6.000) 4. Liabilities Capital 5..000 10.000 55..000 60.000 1. 5.25.000 1.00..70.000 6.000 35.70. Post Trans.000 4.000 1.. .. 4.000 bl is 6.000 60...000 .00.000 5.000 1.00.20.... Post Trans.000 Equation 3.000 60.000) © no N C tt E o R be T re pu 4..000 (60.000 Equation 5.15.000 1..00.00.. 6..25.000 60.000 1.000 1.000 30..00...000 Post Trans.80.15..000 10. 10.. (10.70.000 5..000 Accountancy he d ..20.000 55.20... 5...20.000 .000 Final Equation 10..000 1..00.15. 5.15. Cash Bank Assets Debtors Goods (Stock) Furniture Plant and Machinery 5.

” (iii) “Increase in revenue/gain is credited and decrease in revenue/gain is debited.” (2) For recording changes in Liabilities and Capital/Revenues (Gains): (i) “Increase in liabilities is credited and decrease in liabilities is debited. and (e) Revenues/Gains.” (ii) “Increase in capital is credited and decrease in capital is debited. 3. and decrease in expenses/ losses is credited. and decrease in asset is credited. Account Title (Left Side) (Right Side) Fig.4 : Showing T-account 3. Two fundamental rules are followed to record the changes in these accounts: (1) For recording changes in Assets/Expenses (Losses): (i) “Increase in asset is debited.I 49 enter amount on the left side of an account is to debit the account.1 Rules of Debit and Credit © no N C tt E o R be T re pu Rules of Debit and Credit Asset (Increase) + Debit (Decrease) – Credit (Increase) + Credit (Increase) + Credit (Decrease) – Debit Capital (Decrease) – Debit (Decrease) – Debit Revenues/Gains (Increase) + Debit All accounts are divided into five categories for the purposes of recording the transactions: (a) Asset (b) Liability (c) Capital (d) Expenses/Losses.Recording of Transactions .3.” (ii) “Increase in expenses/losses is debited.” The rules applicable to the different kinds of accounts have been summarised in the following chart: bl Liabilities Expenses/Losses is he (Increase) + Credit (Decrease) – Credit d . To enter amount on the right side is to credit the account.

4. three more transactions have been added (transactions 7 to 9). Increases in assets are debited and increases in capital are credited. On the other hand increases in liabilities are credited. 60.000 and issued cheque for the same Analysis of Transaction : This transaction increases furniture (assets) on one hand and decreases bank (assets) on the other hand by Rs.80. 1.000 (2) 4.15.000 Bought Plant and Machinery from Ramjee lal for the business for Rs. Opened a bank account with an amount of Rs.000 © no N C tt E o R be T re pu Cash Account (1) 5.000.000. 5.000 d .00. decreases cash by Rs. Therefore.000 (6) 10. Therefore.000.000 3.50 Accountancy The transactions in Example 1 on page 46 will help you to learn how to apply these debit and credit rules.000 he (1) 5. record the transactions with debit to Bank account and credit to Cash account.00.80. Therefore record the transactions with debit to Furniture account and credit to Bank account.000 Analysis of Transaction : The transaction increases cash on one hand and increases capital on the other hand.80. 1. 1. Rohit started business with cash Rs.000 (2) 4. Bank Account (3) 60. Therefore record the transaction with debit to Cash and credit to Rohit’s Capital. 10. Increases in assets are debited and a decreases in assets are credited.000 and increases liabilities (M/s Ramjee Lal as creditor) by Rs. Increases in assets are debited and decreases are credited. 1.000 4.80. Increases in assets are debited whereas decreases in assets are credited.25. record the transaction with debit to furniture account and with credit to Cash and Ramjee Lal’s account.00. To illustrate different kinds of events.000 in cash is given. bl is (1) 5. Analysis of Transaction : This transaction increases plant and machinery (assets) by Rs.000 and an advance of Rs. Cash Account Capital Account 2.000 (2) 4.25. Bank Account Bought furniture for Rs. 10. Furniture Account (1) 60. Analysis of Transaction: The transaction increases the cash at bank on one hand and decreases cash in hand on the other hand. 60.00. Observe the analysis table given on page 48 carefully to be sure that you understand before you go on to the next one.

80. 55.80.00.Recording of Transactions . 25. Increases in expenses are debited and increases in liabilities are credited.15.500 Analysis of transaction : The payment of salary is an expense which decreases capital thus.000 (6) 35.000 (7) 2. Credit Cash to record decrease in assets. Credit cash to record decrease in assets.000 © no N C tt E o R be T re pu Sales Account (6) 35.000 Plant and Machinery Account (4) 1.000 (2) 4.000 (4) 10.000 8. Goods purchased from Sumit Traders for Rs. Goods costing Rs. 5.000 (5) 55.000. Increases in assets are debited and increases in revenue are credited. 2.500 (7) 5. Therefore record the transaction with debit to Purchases account and credit to Sumit Traders account. 55. Therefore record the entry with credit to Sales account and debit to Rajani Enterprises account. are recorded as debits. Rajani Enterprises Account Analysis of transaction : The payment of rent is an expense which decreases capital thus. he (5) 55.000 sold to Rajani Enterprises for Rs.000 (4) 10. are recorded as debits.000 7.000 5.000 Analysis of transaction : This transaction increases sales (Revenue) and increases assets (Rajani Enterprises as debtors). Cash Account (2) 4. bl Purchases Account Sumit Traders Account is Analysis of transaction : This transaction increases purchases (expenses) and increases liabilities (M/s Sumit Traders as creditors) by Rs. Paid the monthly store rent Rs. Paid Rs.000 d Ramjee Lal’s Account .000 as salary to the office employees 51 (4) 1.500 in cash Rent Account (7) 2. 35.I Cash Account (1) 5.

500 (8) 5. 50.10 7. Which of the following answers properly classifies these commonly used accounts: (1) Building (2) Wages (3) Credit sales (4) Credit purchases (5) Electricity charges due but not yet paid(outstanding electricity bills) (6) Godown rent paid in advance(prepaid godown rent) (7) Sales (8) Fresh capital introduced (9) Drawings (10) Discount paid Expense 8. Double entry accounting requires that : (i) All transactions that create debits to asset accounts must create credits to liability or capital accounts.6 8 8 Revenue (i) (ii) (iii) 5.000 9.000 Bank’s Account © no N C tt E o R be T re pu (iii) Assets Liabilities Capital 9.I 1.00.4 3.80.000 Cash Account Accountancy (2) 4.000 (9) 35. Increase in assets is debited whereas decrease in assets is credited.000 Received cheque as full payment from Rajani Enterprises and deposited same day into bank d .80. 3. 5 4.9 Analyse the effect of each transaction on assets and liabilities and show that the both sides of Accounting Equation (A = L + C) remains equal : (i) Introduced Rs.10. 1.6 2.00. Rajani Enterprises Account (6) 35.3. bl is Analysis of transaction : This transaction increase assets( Bank) on the one hand and decreases assets(Rajani Enterprises as debtors) on the other hand. 2. Therefore record the entry with debit to Bank account and credit to Rajani Enterprises account. 8.10 1. Does debit always mean increase and credit always mean decrease? 4.000 (2) 4.000 by stock. State different kinds of transactions that increase and decrease capital.000 (4) 10.5 Illustration 1 Test Your Understanding .4.7 2.52 Salary Account (8) 5.000 (1) 5. he (3) 60. Every transaction must be recorded with equal debits equal total credits.000 (7) 2. 3 7. 6 2.000 as cash and Rs. (ii) A transaction that requires a debit to a liability account require a credit to an asset account. 4.000 (9) 35.9.

00.000 on assets side of the equation. Capital is increased by Rs.00.000 +3.000 + 6. (vii) Goods costing to Rs. 8. 75.000) + 6.000 for cash and for Rs.000 was sold for Rs. Rs. Rs. (vi) Goods amounting to Rs.000 in cash and balance at a later date. Solution 53 Assets Cash + 8.000 + = = = = = Assets Cash + Inventory + Plant and + Bank Machinery 7.00.50. 35.35. bl = = = 8.000 and by the same amount bank decreases.000 + into the bank. 6.000 and made payment by cheque.000 and decrease in cash by Rs. 3.00. 6.000 and Inventory of goods by Rs. 00.000.000 Transaction (i) It affects Cash and Inventory on the assets side and Capital on the other hand.000 + 50. (viii) Cheque issued to the supplier of goods worth Rs. Liabilities+ Capital Transaction (iii) It affects assets side only. Liability to pay to the supplier of plant and machinery increases by Rs.85.50.000 he d .50.I (ii) Purchased plant for Rs. Rs.000 by paying Rs.00.000 + 50.000 and by the same amount bank increases. Furniture increases by Rs.00.000 in credit.00. 80.00.000 11.35.85. The composition of the asset side changes. 25.00. (v) Purchased goods worth Rs.000 + Total Inventory(Stock) 50.000 + 3. 35. (ix) Cheque received from customer amounting to Rs. 50. Cash decreases by Rs.000 was sold for Rs.000 + 8.35. There is an increase in plant and machinery by Rs.000 7.000 2.000 on credit.000 8.000 © no N C tt E o R be T re pu Assets Cash +Inventory + Plant and Machinery 8.000.85. There is increase in cash by Rs. 45. 50.000 + 8. 2. 8. Total 11.85.00. 15. 15.35.000) 3.000 8.25. (iv) Purchased office furniture for Rs. Liabilities + Capital Transaction (iv) It affects assets side only. Total 11. The composition of the asset side changes. 1.85.000.Recording of Transactions .000.000 (6.0000 + 3.000 = = = = = Transaction (ii) It affects Cash and Plant and Machinery on the assets side and liabilities on the other side of the equation.000 (15. 3.000 + 8. is Liabilities + Capital 8.000 1. (x) Withdrawn by owner for personal use Rs.000 on cash basis.000 2.50.000 2. 1.000 2. 00. 1. (iii) Deposited Rs.

65.00.000 = on the assets side of the equation.65. Capital increases by Rs. Rs. + 40.50.000 11.20. 45.000 + 1.85.000 Transaction (v) It affects Cash and Inventory on the assets side and liability on the other side.85.65. 000.85.000 on the assets side and liability also decreases by Rs.00.000 on the assts side of the equation.85. 15.000 + 1.000 + 1.000 + 1.000 +3.000 = 11.000.000 + 3.000 + 1.000 = 1. 60.000 = 3.000 3. There is an increase in cash by Rs.000 = (80.20.000 = 3.000 = Assets Cash Total 12.000 = 12.000 + 3.15. + Inventory +Plant and + Bank + Furniture Machinery 1.000 +3.000 = 11.65.000 1. There is increase in debtors by Rs.50.000) 1.20.000 +3. 80.85. = Liabilities + Inventory +Plant and + Bank + Furniture + Debtors Machinery 1.00. 35.00. bl = 11.000 = 2.000) + 1.000 + 8.54 Accountancy Rs.25. Capital increases by Rs.000 + 50.000 Total 11.00.000 + Capital Transaction (viii) It affects Bank on the assets side on one side and liability on the other side. Total © no N C tt E o R be T re pu Assets Cash + Inventory + Plant and + Bank + Furniture Machinery 1.000 + + 1.05.000 +5.000) + 1.000 + 8.000 and decrease in Inventory of goods by Rs.00. 1.000 + 1.000 + 1. Rs.85.000 + 1.000 Transaction (vi) It affects Cash and Inventory on the assets side and capital on the other side.000 + 1.000 + There is decrease in bank by Rs.000 + 5.000 + 9.000 + 8.000 + (45. 1.00.000 + 5.000 + 1. 35.00.000 + 50.000 is = 2.000 1.000 +5.00.000 + 50.000 ( .000 = 3.00.000 on the assets side of the equation.00.000 = Liabilities + = Capital 2.00. 25.000 + 8. Assets Cash Total 11.000 + 3.000) + 1. = Liabilitie + Capital Transaction (vii) It affects Debtors and Inventory on the assets side and capital on the other side.35.000 + 3. Liabilities increases by Rs.000 + 45.15. 35.00.000 + 5.65.000 and increase of inventory of goods by Rs.000 + 15.00.000 + 6.20.000 +3.000 + 8.000 (80.20. 80.00.000 and decrease in inventory of goods by Rs.30.000 +5. There is decrease in cash by Rs. Rs.00.000 + 8.85.000 60.000 + Assets Cash = Liabilities + he Capital d + Inventory + Plant and + Bank + Furniture Machinery 1.85.20.

000 Transaction (x ) It affects Cash on the asset side and Capital on the other hand.000 + Total 11.000 Transaction (ix) It affects assets side only.000 + (25.000 + 1.000) 1.000 + 9. The source document.20. you learnt about debits and credits and observed how transactions affect accounts.95.65. After the debits and credits for each transaction are entered in the journal.85.00.000 = 2. they are transferred to the individual accounts.00.000) 1.000 = 11.000= 2.000 and by the same amount Debtors decreases.40.000 + 40.000 + 3.000 + 9. Rs. Total 11.000 + 1.000 + 5.000 is = 2.000 = 11.65. as discussed earlier.4 Books of Original Entry In the preceding pages.85. Assets Cash = Liabilities + Capital Total 11.000 + 1.000 = 50.000 + 5.000 © no N C tt E o R be T re pu Assets Cash + Inventory +Plant and + Bank + Furniture + Machinery 1.000 he Capital d + Inventory + Plant and + Bank + Furniture + Debtors Machinery 1.000 + + 75.40. Once the journalising process is completed.000 + 3.000 + 1.000 + 1.000 + 50.Recording of Transactions .000 = 3.95. is required to record the transaction in the journal.65.40. the journal entry provides bl = 11.65. 75.95.000 + 3.000 on the assets side whereas capital decreases by Rs.00.00.000 +5.000 + 9.000 2. The book in which the transaction is recorded for the first time is called journal or book of original entry.95.000 + 4.000 + 1.00.000 + 40.000 + 9. The process of recording transactions in journal is called journalising.000) = ( + 1.000 + 40. Bank increases by R.000 + 40.I 55 Rs.10. +3.40. Capital = Liabilities + 3.95. There is decrease in Cash by Rs.000 + .000 + 1.25.000 (35.00.000) = 2.000 + 1.000 + 9.000+ 40. The composition of the assets side changes.000 +4. This practice provides a complete record of each transaction in one place and links the debits and credits for each transaction.000 Assets Cash = Liabilities + + Inventory +Plant and + Bank + Furniture + Debtors Machinary 1.000 + (25. Rs.000 Debtors 50. real accounting systems do not record transactions directly in the accounts.00. 25.85.000 + 1.10.000 + 3.85. However.25. This process of analysing transactions and recording their effects directly in the accounts is helpful as a learning exercise. (75.000 + 5.

The format of Journal is shown is figure 3. Below the bl is Credit Amount Rs. In this book. The cash book and other day books are dealt in detail in chapter 4. as and when they take place.F.5 The first column in a journal is Date on which the transaction took place. Debit Amount Rs. transactions from this book are posted to the respective accounts. This sequence causes the journal to be called the Book of Original Entry and the ledger account as the Principal Book of entry. This is the basic book of original entry. 3. he (b) Cash book d a complete and useful description of the event’s effect on the organisation. Each transaction is separately recorded after determining the particular account to be debited or credited.1 Journal Journal Date Particulars L. The account title to be credited is written on the second line leaving sufficient margin on the left side with a prefix ‘To’. Afterwards. Fig.’ is written at the end of the column. In this context.56 Accountancy (c) Other day books: © no N C tt E o R be T re pu 3. The process of transferring journal entry to individual accounts is called p o s t i n g . the journal is subdivided into a number of books of original entry as follows: (a) Journal Proper . it should be noted that on account of the number and commonality of most transactions.4.5 : Showing the format of journal (i) Purchases (journal) book (ii) Sales (journal) book (iii) Purchase Returns (journal) book (iv) Sale Returns (journal) book (v) Bills Receivable (journal) book (vi) Bills Payable (journal) book In this chapter you will learn about the process of journalising and their posting into ledger. transactions are recorded in the chronological order. In the Particulars column. the account title to be debited is written on the first line beginning from the left hand corner and the word ‘Dr.

The column relating to Ledger Folio records the page number of the ledger book on which relevant account is appears.I 57 © no N C tt E o R be T re pu Journal Date Particulars L. the number of transactions is very large and these are recorded in number of pages in the journal book. 5. In fact. The entry made in the journal on July 4. It increases furniture (assets) by Rs. 2010 is : bl is Credit Amount Rs. The Debit amount column records the amount against the account to be debited and similarly the Credit Amount column records the amount against the account to be credited. When only two accounts are involved to record a transaction.000. 5. entry made for recording the transaction is called compound journal entry.000 he d . This transaction is recorded in the journal as follows : It will be noticed that although the transaction results in an increase in stock of goods. account titles. Office furniture is purchased from Modern Furniture’s on July 4. This column is filled up at the time of posting and not at the time of making journal entry. as explained in chapter 4 the goods account is divided into five accounts. the account debited is purchases. sales returns account. which indicates the end of recording the specific journal entry. Goods Purchased on credit for Rs.Recording of Transactions . not goods. involves only two accounts: (a) Purchases A/c (Goods).000 from M/s Govind Traders on December 24.30. 25.000 2010 Dec. Debit Amount Rs. 20. It may be noted that. a brief description of the transaction is given which is called Narration. purchases account. 30.000 and Rs. viz. Having written the Narration a line is drawn in the Particulars column. decreases cash (assets) by Rs.F.000. 20. For example. from Govind Traders) Dr. It may be simple or compound.000 is paid by cash immediately and balance of Rs. (b) Govind Traders A/c (Creditors). sales account. 2010 for Rs. 30. The journal entry is the basic record of a business transaction. at the end of each page of the journal book. it is called a simple journal entry.000 and increases liability by Rs. 2010. and stock account.000 is still payable. the amount columns are totaled and carried forward (c/f) to the next page where such amounts are recorded as brought forward (b/f) balances.24 Purchases A/c To Govind Traders A/c (Purchase of goods. For Example. That means compound journal entry involves multiple accounts. When the number of accounts to be debited or credited is more than one. purchases returns account. Hence.

000 10.000 Accountancy Credit Amount Rs. 35. © no N C tt E o R be T re pu Cash A/c To Capital A/c (Business started with cash) Dr. Debit Amount Rs.000 55.55.000 55. To Cash A/c To Ramjee Lal (Bought Plant and Machinery from M/s Ramjee Lal. To Cash A/c (Opened bank account with State Bank of India) Furniture A/c To Bank A/c ( Purchased furniture and made payment through bank)) 4.000 Total 12. made an advance payment by cash for Rs.000 4.80.00.F.000 Dr. 5. Date Particulars L. Books of Rohit Journal is Credit Amount Rs.000 60.80.000 Dr.000 bl Debit Amount Rs.000 d 2010 July 4 Office Furniture A/c To Cash A/c To Modern Furniture A/c (Purchase of office furniture from Modern Furnitures) Dr. 60.000 Now refer to example 1(on page 46 again and observe how the transactions listed are recorded in the journal: he 5. 25.000 20. 5.F.25. 10. .000 12.000 Bank A/c Dr.000 Plant and Machinery A/c Dr. 1.000 and balance at the later date ) Purchases A/c To M/s Sumit Traders A/c (Goods bought on credit) Rajani Enterprises A/c To Sales A/c (Goods sold on profit) Dr.000 35.58 Journal Date Particulars L.55.

Purchased goods for Rs. Purchased office furniture for Rs.88.1.4. 2.000 by cehque. 6.01 Dr. Insurance paid by cheque Rs. Open a bank account with SBI for Rs.F.200 bl Credit Amount Rs. 14.200.2010 14. 5000.000. Sold goods to Nidhi Rs. 16.000. 2.000. 35.000 Apr.2.000 cash. 1.4.500 given as charity. Received a cheque of Rs. 1.2010 08.000 from Priya.4.4. Payment of salaries in cash Rs.2010 30.50. Solution Books of Saroj Mart Journal Date Particulars L. Soraj Mart furnishes the following information : Transactions during the month of April.4. 1.50. Goods purchased form Manisha Rs. 2010 Apr. © no N C tt E o R be T re pu Journalise the transactions.2010 1.000 Apr. 36.I 59 Illustration 2.50. Paid rent Rs.2010 30.2010 24.000.Recording of Transactions . Interest received cash Rs.2010 3.200 Total c/f 1. Commission paid Rs.4.4.2010 Details Business started with cash Rs. 2.200.2010 30.2010 18. 2. Goods costing Rs. 20.2010 29. Stationery purchased for cash Rs.4.4.2010 10.200 1. 2010 are as under : Date 1.300.4.4.4. 11.01 Cash A/c To Capital A/c (Business started with cash) Purchases A/c To Manisha A/c (Goods purchase on credit) Dr. Telephone bill paid by cheque Rs.4. Debit Amount Rs. Cash sales Rs.000.2010 1.000 2.4. 36.2010 2. Nidhi pays Rs.4.200 is he d . Goods sold to Priya for Rs.01 Stationery A/c To Cash A/c ( Purchase of stationery for cash) Dr. 1.000. 16.4. 14.000 36. 12.000 on credit from Ritu.4.88. 3.000.2010 30.2010 20.4.4. Cash withdrawn for household purposes Rs.000.2010 5.2010 2.

29 Drawings A/c Dr.000 is 14.000 1.000 20.02 Apr. 14.400 bl 20. 2.300 Total c/f 3.200 35.000 1. 11.000 2. To Bank A/c (Payment of Insurance premium by cheque) Rent A/c To Cash A/c (Rent paid) 6.30 Apr.000 Apr.000 Accountancy 1. © no N C tt E o R be T re pu Apr.000 .500 Apr.000 Apr. To Cash A/c (With drawl of cash from the business for personal use of the proprietor) Dr.000 14.03 Dr.14 Insurance Premium A/c Dr.88.200 2.32.000 Apr.400 he 16. 16.500 11.000 Apr.200 5.02 Bank A/c Dr.000 Apr.30 Cash A/c To Interest received A/c (Interest received) Cash A/c To Sales A/c (Sale of goods for cash) 1.20 Charity A/c To Purchases A/c (Goods given as charity) Dr. 14.000 d 16. 1. To Cash A/c (Opened a bank account with SBI) Priya A/c To Sales A/c (Goods sold to Priya On Credit) Bank A/c To Priya A/c (Cheque Received from Priya) Nidhi A/c To Sales A/c (Sale of goods to Nidhi on credit) Cash A/c To Nidhi A/c (Cash received from Nidhi) Purchases A/c To Ritu A/c (Purchase of goods on credit) Dr.000 Apr.000 Apr.000 16. 5.32.200 35.24 Furniture A/c Dr.200 To Cash A/c (Purchase of office furniture) Apr. 2.000 6.05 Dr.18 Dr.10 Dr.300 3.60 Total b/f Apr. 1.08 Dr.200 Dr.88.

30. 30. Rs. (i) Cash A/c To Capital A/c (Business started with cash) Dr.32. Furniture of Rs. 30.000 .F. Debit Amount Rs.Recording of Transactions .000 10. 4.000 Apr. 70.50. Rs. 6. bl Prove that the accounting equation is satisfied in all the following transactions of Sita Ram house by preparing the analysis table.000 d 2. Purchased goods worth Rs. 6. 50.000 Total Illustration 3 3.000 for cash and Rs. 40.000 (ii) Bank A/c To Cash A/c (Cash deposited into the bank) Dr.32.400 Apr.000 cash immediately. 45. (i) Business commenced with a capital of Rs. 2. Solution Journal Date Particulars L.30 Salaries A/c Dr. To Cash A/c (Payment of salary to the office persons) 12.000 cash for personal use.000 he 12.000).000 deposited in a bank account.400 3. Also record the transactions in Journal.50. 2.000 to the supplier for Plant and Machinery. 5.500.000 on account.00.000 purchased in cash. Salary of Rs.50. Paid a cheque of Rs. 4.49. 00. Withdrawn by the proprietor Rs.49. 2.I Total c/f Apr.400 © no N C tt E o R be T re pu (iv) (v) (vi) (vii) (viii) (ix) (x) Insurance paid by cheque of Rs.000 cash sales (of goods costing Rs.50.000 61 3.30 Dr.000 Total c/f 10. 35. is Credit Amount Rs. 6.000 4. 2.000 3.00.400 3.30 Commission A/c To Bank A/c (Commission paid by cheque) Telephone expenses A/c To Cash A/c (Payment of telephone bill) Dr.000 Plant and Machinery Purchased by paying Rs.50.00.500 outstanding. 3.000 (ii) (iii) Rs.000.

000 2.000 17.500 (x) Furniture A/c To Cash A/c (Furniture purchased for cash) Dr.00.000 cash and balance on a later date) Purchases A/c Dr.000 2.000 is 2.000 d .50.000 30. 30.000 (viii) Insurance A/c To Bank A/c (Paid insurance by cheque) Dr. Bhanu commenced business with cash 1.000 2.II State the title of the accounts affected.000 Accountancy 10.000 he 40.000 2.500 5. Paid salaries 3.30. Purchased goods on credit from Ramesh 40. Sold goods for cash 30.00.000 (v) 2.00. Furniture purchased for cash 10.50. type of account and the account to be debited and account to be credited : Rs 1. 35.000 70.08.000 4.000 Test Your Understanding .62 Total c/f Plant and Machinery A/c Dr.000 bl 70. To Cash A/c To Creditors A/c (Bought goods for cash as well as on credit) Creditor’s A/c Dr. 30.000 35.000 5.000 (iii) (vi) © no N C tt E o R be T re pu (vii) Dr. 5. To Cash A/c To Creditors A/c (Purchase of plant and machinery by paying Rs. 2. 10.500 30.000 Total 17. To Bank A/c (Payment made to the supplier of plant and machinery) Cash A/c To Sales A/c (Sold goods on profit) Drawings A/c To Cash A/c (Withdrew cash for personal use) Dr.500 (ix) Salary A/c To Outstanding salary A/c (Salary outstanding ) Dr.000 45.000 (iv) 85.

000 2.85.000) 6.000 2.000 20.45.000) .00.50.000 - 5.000) 6.000 - 6.000 8.000 7 - 2.500 63 he d .000 45.000 80.000 (35. Cash Bank Stock Furniture = = = = = = = = = - Plant and Machinery Total = 1 - - 6.000 (40.000 1.000 20.15.000) 1.000 4.000 .500 bl is 5.30.000) 2.000 2.000) 4.000 4.000 6.27.000 (4.000 6.000 -(30.000 6.000 8 6.000 5.500 2.500 (5.27.000 2.500) 5.000 45.Statement showing the effect of various transaction on accounting equation (Figures in rupees) Non-trade Creditors (35.00.000 ( 45.000 6.000 Recording of Transactions .00.000 35.000 9 10 = 1.000 (35.30.000 6.000 (2.00.I 2 3 4 5 6 -45.000 85.500 - 45.000 85.000 6.500) 1.000 2.000 8.(50.00.500) 45.000 ( 6.00.500 6.000 20.000) 80.000) 20.000 .500 5.30.000 - © no N C tt E o R be T re pu 35.000 30.500) 6.000 35.000 600.500 6.000) 1.000 1.000 6.27.000 2.45.000) - 45.500) 5.000 2.000 (30.000 2.000 (2.000 6.000 45.000 2.000 Trade Creditors Capital Total No.00.000 4.000 (2.00.000 6.000 (2.00.000 (2.000 8.000 = - 2.50.000 - 6.500 35.00.(2.000 600.30.000 70.000) 6.20.500 - 5.000 2.500 45.500 35.77.000 (35.000 8.000 2.47.

000 10. In the ledger.6. In the beginning. Borrowed from bank Sold goods to Sarita Cash paid to Ramesh on account Rent paid Name of Accounts Affected 1 1. 6. 8. For easy posting and location.64 6. Liabilities Capital. 5. 7. 4. 2 Type of Accounts (Assets.5 The Ledger The ledger is the principal book of accounting system. each account is opened preferably on separate page or card. the management on a particular date wants to know the amount due from a certain customer or the amount the firm has to pay to a particular supplier.000 20.000 1. or separate sheets may be maintained in a loose leaf binder. bl is he 1 2 d Transaction No. A ledger is the collection of all the accounts. Affected Accounts Increase/Decrease . an index is also provided. each account is also allotted a code number. 8. 3. It contains different accounts where transactions relating to that account are recorded. Revenues and Expenses) 1 2 50. A ledger is very useful and is of utmost importance in the organisation. they may be opened in the same order as they appear in the profit and loss account and in balance sheet. Format of the account is shown in figure 3.500 Accountancy © no N C tt E o R be T re pu Utility 3. A ledger may be in the form of bound register. 7. 9. 2. accounts are opened in the ledger in some definite order. in the journal proper and various special journal (about which you will learn in chapter 4). such information can be found only in the ledger. debited or credited. The net result of all transactions in respect of a particular account on a given date can be ascertained only from the ledger. For example. For example. 9. Such information is very difficult to ascertain from the journal because the transactions are recorded in the chronological order and defies classification. For easy identification. in big organisations. or cards.

2. Month and Date of transactions are posted in chronological order in this column.I Name of the Account Dr. corresponding to what has been entered in the amount column of the original book of entry. The (a) (b) (c) (d) 2. Amount Rs. The (a) (b) (c) (d) According to this format the columns will contain the information as given below: An account is debited or credited according to the rules of debit and credit already explained in respect of each category of account.00. i. 3. Journal Folio : It records the page number of the original book of entry on which relevant transaction is recorded. Amount Rs. Fig.000 and Credit cash 2. : Dr. Record the number of ledger account to which information is posted. Date Particulars J. ledger folio column of journal is used to: Record the date on which amount posted to a ledger account. Dr.000 due in 30 days include: (a) Debit equipment for Rs. 3. means Credit side of the account. Title of the account : The Name of the item is written at the top of the format as the title of the account. Particulars : Name of the item with reference to the original book of entry is written on debit/credit side of the account.Recording of Transactions . The title of the account ends with suffix ‘Account’./Cr. 65 Cr.000 cash and a balance of Rs.000. Date : Year. means Debit side of the account that is left side and Cr. right side.00. Record the page number of the ledger account.III Choose the Correct Answer : 1. Debit to fees income and Credit to debtors. journal entry to record the sale of services on credit should include: Debit to debtors and credit to capital. Date Particulars J. Debit to cash and Credit to debtors.e.00. 8.F. This column is filled up at the time of posting.6 : Showing format of a ledger © no N C tt E o R be T re pu Test Your Understanding . Record the number of amounts posted to the ledger account.F. 2. bl is he d . Debit to debtors and Credit to fees income. Amount : This column records the amount in numerical figure. The journal entry to record purchase of equipment for Rs.00.

the ledger is the book for analytical record. 6. 5.000 and Credit debtors Rs. (c) Accounts to be credited listed first. Account is the basis of classification of data within the ledger. The Journal and the Ledger are the most important books of the double entry mechanism of accounting and are indispensable for an accounting system. Total amount debited will equals total amount credited.00. (b) Debit capital and Credit cash. 10. 2. Debit equipment Rs.00. 4. 2.00. Transaction is the basis of classification of data within the Journal.66 (b) (c) (d) Accountancy Debit equipment for Rs.00.00. as a book of source entry. One account balance will increase and another will decrease. 3. bl is 5. Debit equipment Rs. (d) Accounts may be listed in any order. gets greater importance as legal evidence than the ledger. the process of recording in the ledger is known as Posting. 10. (c) Debit monthly bill and Credit cash. Process of recording in the Journal is called Journalising. 10. Journal entry to record salaries will include: (a) Debit salaries Credit cash. © no N C tt E o R be T re pu Distinction between Journal and Ledger 1.00. The Journal. Following points of comparison are worth noting : The Journal is the book of first entry (original entry). d . (d) Debit monthly bill and Credit creditors. 7. The journal entry to record payment of monthly bill will include: (a) Debit monthly bill and Credit capital. (c) Debit cash Credit salary. he 4.000. The Journal is the book for chronological record. If a (a) (b) (c) (d) transaction is properly analysed and recorded: Only two accounts will be used to record the transaction. One account will be used to record transaction. 2. 8. 8. the ledger is the book of second entry. (b) Debit capital Credit cash.000 and Credit cash Rs. When a entry is made in journal: (a) Assets are listed first.000.000 and Credit cash Rs. (b) Accounts to be debited listed first. (d) Debit salary Credit creditors.00.000 and creditors Rs.000.

Recording of Transactions .1 Classification of Ledger Accounts We have seen earlier that all ledger accounts are put into five categories namely.I 67 3.000. Thus. may be. We will now see how the transactions listed in example on page 47 are posted to different accounts from the journal. the word. For example. cash will be recorded.6 Posting from Journal © no N C tt E o R be T re pu Posting is the process of transferring the entries from the books of original entry (journal) to the ledger. in cash account on the debit side in the particulars column ‘Furniture’ will be entered signifying that cash is received from the sale of furniture. Now. posting means grouping of all the transactions in respect to a particular account at one place for meaningful conclusion and to further the accounting process. liabilities. Posting from the journal is done periodically. weekly or fortnightly or monthly as per the requirements and convenience of the business. In other words. all assets. in the ledger on the credit side is the particulars column. capital. Step 2 : Enter the date of transaction in the date column on the debit side. liabilities and capital accounts are permanent accounts and all revenue and expense accounts are temporary accounts. The same procedure is followed in respect of all the entries recorded in the journal. It may be noted that the same procedure is followed for making the entry on the credit side of that account to be credited. permanent accounts and temporary accounts. furniture sold for cash Rs. i. All these accounts may further be put into two groups. the account to be debited as entered in the journal. An account is opened only once in the ledger and all entries relating to a particular account is posted on the debit or credit side. In Furniture account. as the case may be. Step 3 : In the ‘Particulars’ column write the name of the account through which it has been debited in the journal. All permanent accounts appears in the balance sheet. 34. The temporary accounts are closed at the end of the accounting period by transferring them to the trading and profit and loss account. This classification is also relevant for preparing the financial statements. bl is he d . assets. All permanent accounts are balanced and carried forward to the next accounting period. Step 5 : Enter the relevant amount in the amount column on the debit side. The complete process of posting from journal to ledger has been discussed below: Step 1 : Locate in the ledger. revenues/gains and expense losses.5. 3. Step 4 : Enter the page number of the journal in the folio column and in the journal write the page number of the ledger on which a particular account appears.e.

J.00. Particulars Plant and Machinery bl Particulars Furniture J. Amount Rs.15. Amount Rs.F. Date Particulars Cash J. Cr. Date Particulars J. 5. Amount Rs. Accountancy Cr.F. 5.80.68 Cash Account Dr.F.F.000 he Cr.000 Amount Rs. Particulars Ramjee lal 1.F. J. J. Capital Account d . Bank Amount R s.000 Particulars Plant and Machinery Account Amount Rs. Date Particulars J.15. 60. Date Particulars Capital J. 1. Amount Rs.00.F. Cr.000 10.000 Date © no N C tt E o R be T re pu Furniture Account Date Dr.000 Date Particulars Bank Plant and Machinery J. 60. Date Particulars Cash J.000 Ramjee Lal’s Account Amount Rs.000 Dr.F. Cr. 10. 4. Amount Rs.F. Date Dr. J.80.000 Date Dr.F.F. is Amount Rs. 4.F.F. Date Particulars Cash Bank Account Dr.000 Cr. Date Particulars J. Amount Rs. Amount Rs.

55. Date Particulars Sales J. 50. Provided services for Rs. is Amount Rs. Issued a cheque for Rs.000 Sales Account Date Date © no N C tt E o R be T re pu Dr.. J.F......... Amount Rs.. 4. 3..F..000 he Cr...... Amount Rs. Cr...IV bl Particulars J.F. Dr.I Purchases Account Dr.. Amount Rs. 2. 6...F... Issued cheque for Rs..000 to pay off on of the creditors... 7. Date Particulars J. Purchased office stationary for Rs... The account to be debited is ..000... 55. 1. The account to be debited is .F. 35. Date Particulars J.. Amount Rs..000 Cr.... 35.. 35..70. 69 Cr. The account to be credited is .. Purchased new machine for Rs.. Amount Rs.000 and issued cheque for the same. Sumit Traders Account d ..F.000. 70. 5... Date Particulars Purchases Rajani Enterprises Account Dr. 18.8.. Returned damaged office stationary and received Rs........F. Fill in the blanks: 1.. J... Particulars Rajani Enter prises Test Your Understanding ... The account to be debited is . The account to be debited is . Date Particulars Sumit Traders J... 65.F....000 on credit.. Amount Rs..000 Date Particulars J...000 from debtors..Recording of Transactions .. Collected Rs..000 to pay rent. Amount Rs.. The account to be credited is ..... The account to be credited is ..

To Gulmohar Fashion House A/c (Goods purchased on credit) June 12 Office Machines A/c To Bank A/c (Office machine purchased) June 18 Rent A/c To Bank A/c (Rent paid) June 20 Mohit Bros A/c To Sales A/c (Goods sold on credit) Dr. 10.45.00. 2.000 5. 80.000 20. Debit Amount Rs.000 30.000 © no N C tt E o R be T re pu Date Particulars L.45.00. 30.000 20.000 Total c/f 3.F.000 June 08 Bank A/c To Cash A/c (Opened a current account with syndicate bank) Dr.000 30.000 6. 2010 June 05 Cash A/c To Capital A/c (Business started with cash) Dr.70 Illustration 4 Accountancy Journalise the following transactions of M/s Mallika Fashion House and post the entries to the Ledger: Date 2010 June 05 June 08 June 12 June 12 June 18 June 20 June 22 June 25 June 28 June 30 Solution (i) Recording the transactions Details Business started with cash Opened a bank account with Syndicate Bank Goods purchased on credit from M/s Gulmohar Fashion House Purchase office machines.000 Dr.000 80.000 15. 2.000 5.000 3.000 20.000 June 12 Purchases A/c Dr. 2.000 Books of Mallika Fashion House Journal bl Credit Amount Rs.000 30.000 80.000 10. 5.000 10.000 10.000 is he d .000 Dr. paid by cheque Rent paid by cheque Sale of goods on credit to M/s Mohit Bros Cash sales Cash paid to M/s Gulmohar Fashion House Received a cheque from M/s Mohit Bros Salary paid in cash Amount Rs.00.

Date Posting in the Ledger Book Cash Account Date © no N C tt E o R be T re pu Particulars J.000 Particulars 2010 2010 June 08 June 28 Cash Mohit Bros.000 2010 June 8 June 25 June 30 Capital Account Date Dr.000 5. Amount Rs. Amount Rs. Date Particulars J.000 Dr. Amount Rs.000 Cr.F.000 To Cash A/c (Cash paid to Gulmohar Fashion House) June 28 Bank A/c To Mohit Bros A/c (Payment received in full and final settlement) June 30 Salary A/c To Cash A/c (Monthly salary paid) Dr.000 30.45.F.06. Bank Gulmohar Fashion House Salary J.000 Cr.000 is 6. Amount Rs.000 71 3.000 June 25 (ii) Dr.000 d . J.Recording of Transactions . Particulars 2010 June 5 June 22 Capital Sales 2. 80.000 4.00.000 15. Office Machines Rent Total 4.000 Dr.000 15.000 15.06. 30. 10.000 he 10. 3. Bank Account Date Date Particulars J.000 6. Amount Rs.F. Particulars Cash 2010 June 5 Dr.00. 6.000 Cr.F.45.000 10.F. Amount Rs. June 12 June 18 bl J. 30. 80.I Total b/f June 22 Cash A/c To Sales A/c (Goods sold for cash) Gulmohar Fashion House A/c Dr. 2.F.000 30.

F.000 Cr. 30.000 Date Dr.000 Particulars J. J. Particulars 2010 June 18 Bank 5. Cr. Date Particulars J. J. 10. Amount Rs. Cr. Amount Rs.F. 20. Particulars 2010 June 20 2010 June 20 June 22 Mohit Bros.F. Amount Rs.000 15.F. 10.F. Accountancy Cr.000 Cr. Gulmohar Fashion House Account Dr. Date 2010 June 12 Gulmohar Fashion House 30. 10. Date 2010 June 12 Office Machines Account Particulars J. Particulars 2010 June 20 Sales 2010 June 28 Cash Sales Account Date Dr.000 he Cr. Amount Rs.000 Date © no N C tt E o R be T re pu Bank Rent Account Date Dr.F. Amount Rs. Date 2010 June 25 Particulars J. is 30. d . Amount Rs. Amount Rs.72 Purchases Account Dr.F.F. Cash bl Particulars J. Amount Rs.000 Date 2010 June 12 Particulars Cash Purchases Dr. J. Date Particulars J. Account Amount Rs.F. Amount Rs.F. Date 2010 Particulars J. Amount Rs. Amount Rs. Date Particulars J.000 Mohit Bros.F.F. J.

Dec.72.000 4.72. 1.000 3. Dec.000 12.20.F. Dec. 01 02 04 10 12 14 16 18 19 20 Details Business started with cash Opened a bank account with ICICI Goods purchased for cash Paid cartage Goods sold on credit to M/s Lara India Cash received from M/s Lara India Goods returned from Lara India Paid trade expenses Goods purchased on credit from Taranum Cheque received from M/s Lara India for final settlement and deposited sameday into bank Goods returned to Taranum Paid for stationery Cheque given to Taranum on account Paid rent by cheque Drew cash for personal use Cash sales Goods sold to M/s Rupak Traders Books of Time Zone Journal Particulars J.000 11.000 500 25.000 11. © no N C tt E o R be T re pu 22 24 26 28 29 30 31 Solution Date Particulars L. Dec. 1. Dec.500 1.000 12.00 12. 73 Cr.000 700 32. Dec. 12. 6. Journalise the following transactions of M/s Time Zone and post them to the ledger accounts : Amount Rs.000 1.00.000 10. Debit Amount Rs.000 Dr. Dec.I Salary Account Dr. Date 2010 June 30 Illustrtion 5 Date 2010 Dec. Dec.F. Dec. Dec. Dec. 2010 Dec.000 40. Dec.000 02 04 Bank A/c To Cash A/c (Opened a current account with ICICI bank) Purchases A/c To Cash A/c (Goods purchased for cash) Total c/f Dr.20. 01 Cash A/c To Capital A/c ( Business started with cash) Dr.000 Date Particulars J.000 10.500 d Cash .200 20.000 he 1. Amount Rs. Dec. Amount Rs.F.000 4.20.Recording of Transactions . Dec. Dec.000 bl is 1.000 1. Dec.000 Credit Amount Rs. 40.

000 12.72.14. 1.000 4. To Bank A/c (Rent paid by cheque) Drawings A/c Dr.200 26 28 29 30 Taranum’s A/c Dr.200 20.000 18 Dr.000 10.000 is 700 700 32. 25. To Cash A/c (Cash withdrawn for personal use) Cash A/c Dr.000 12 16 Dr. 19 Dr.74 Total b/f 10 Cartage A/c To Cash A/c (Cartage paid) Lara India A/c To Sales A/c (Goods sold on credit) Cash A/c To Lara India A/c (Cash received from Lara India) Sales Return A/c To Lara India A/c (Goods returned from Lara India) Trade Expenses A/c To Cash A/c (Trade expenses paid) Purchases A/c To Tranum’s A/c (Goods purchased on credit) Dr. 900 he 10.500 24 Dr. To Lara India A/c (Cheque received for final settlement) Taranum’s A/c To Purchase Return’s A/c (Goods returned to Tranum) Stationery A/c To Cash A/c (Cash paid for stationery) Dr.000 1.000 31 Dr. 11.14.000 4. 11.000 3.000 Total 3.72.000 12.000 500 Dr. 1. To Sales A/c (Goods sold for cash) Rupak Trader A/c To Sales A/c (Goods sold on credit) 20. 10. 3.000 3.000 10.000 11. To Bank A/c (Cheque given to Tranum) Rent A/c Dr.000 500 Accountancy 1.000 .000 14 Dr.000 d 25.500 500 22 1.900 bl 32.000 12. Discount A/c Dr.500 1. © no N C tt E o R be T re pu 20 Bank A/c Dr.

Amount Rs.02 Dec. 14 Dec. Particulars 500 bl Cash J.28 Taranum’s Rent Purchases Account Amount Rs. he Cr.F. Amount Rs. 1. Date Particulars J. Dec. 29 Dr.000 Date 2010 Dec.000 © no N C tt E o R be T re pu Bank Account Date Dr.20.19 Cash Taranum 12. Date Particulars J. Cr.000 500 700 1.04 Dec.26 Dec. Date Particulars J. Cr.000 10. 1. Date 2010 Dec.000 11.000 32.Recording of Transactions . 2010 Dec.000 12.200 1.000 12.000 Amount Rs.10 Amount Rs. Capital Account Amount Rs. 30 Particulars Capital Lara India Sales J.F.F.20. Amount Rs. 02 Dec. Particulars is J. Cartage Account Date Date Particulars Cash J.500 2010 Dec. Particulars 2010 Dec. 04 Dec. J.01 Particulars Bank Purchase Cartage Trade Expenses Stationery Drawings J.F.F. J. 24. Date 2005 Dec. 20.I Posting in the Ledger Book : Dr.F. 01 Dec.000 4. Cash Account Amount Rs.20 Cash Lara India 40. 75 Cr.F. Date Dr. Amount Rs. Particulars 2010 Dec.F.F.000 Dr.000 Amount Rs. Cr. 10 Dec. d .F. 40. 18 Dec.

Sales Account Amount Rs. 10.F.000 Cr. Date 2010 Dec.22 Dec. 3.F. Cr. d Sales Cash Sales return Bank Discount .12 Dec. Date Dr. J. Date Particulars J.F.000 Date 2010 Dec.19 Purchase 20. 32.F.16 Lara India Trade Expenses Account Amount Rs.F. Particulars 2010 Dec.000 12. Amount Rs. Sales Return Account Amount Rs. Lara India Cash Rupak Traders is 25. Accountancy Cr. 16 Dec. Date Particulars J.F.F.31 Particulars © no N C tt E o R be T re pu Dr.000 Date Date Particulars J. Cr.000 11. Amount Rs. 25.500 Particulars 2010 Dec. J.76 Lara India Account Dr.F. Date Taranum Account Date Particulars J. 20 Particulars J. Particulars 2010 Dec.30 Dec. Amount Rs.000 he Cr.18 Cash 700 Dr.000 3.000 bl J.26 Purchase Return Bank 2010 Dec.12 Particulars J.F. J. Amount Rs.F. Amount Rs. 1.500 500 Dr. 14 Dec. Date 2010 Dec. Amount Rs.000 11. Amount Rs.

77 Cr. 28 Bank Drawings Account Date Dr. Date Particulars J. 500 Purchases Return Account Dr. 1. Date 2010 Dec.20 Particulars J.22 Stationery Account Particulars J.F. Date Particulars J. J. Date Particulars J. J. © no N C tt E o R be T re pu Cash Rent Account Date Dr.F. 10. Amount Rs.500 Cr. Amount Rs.Recording of Transactions . Cr. Cr. J. is Amount Rs.F. Date 2010 Dec. 31 Sales bl Particulars J. Taranum he Cr. Amount Rs. Date 2010 Dec. Dr. Amount Rs. J.F.200 Date Particulars Date Particulars J. Amount Rs. 11. Date Particulars J. 1.F.I Discount Paid Account Dr.F. Particulars 2010 Dec.000 Particulars 2010 Dec.F. d Lara India .000 Particulars 2010 Dec. Amount Rs.F. 29 Cash Rupak Traders Account Amount Rs.F. Cr.F.F. 4. Amount Rs. Amount Rs. Amount Rs. Amount Rs.000 Date Dr.F.

Recording of transaction in the Journal is called: (i) Casting (ii ) Posting (iii ) Journalising (iv ) Recording Accountancy © no N C tt E o R be T re pu bl is he d . Which of the following is correct? (i) Liabilities = Assets + Capital (ii ) Assets = Liabilities – Capital (iii ) Capital = Assets – Liabilities (iv ) Capital = Assets + Liabilities. Find the correct statement: (i) Credit a decrease in assets (ii ) Credit the increase in expenses (iii ) Debit the increase in revenue (iv ) Credit the increase in capital 8. Voucher is prepared from: (i) Documentary evidence (ii ) Journal entry (iii ) Ledger account (iv ) All of the above 3. The book in which all accounts are maintained is known as: (i) Cash Book (ii ) Journal (iii ) Purchases Book (iv ) Ledger 9. How many sides does an account have? (i) Two (ii ) Three (iii ) one (iv ) None of These 4.V Select Right Answer: 1. Cash withdrawn by the Proprietor should be credited to: (i) Drawings account (ii ) Capital account (iii ) Profit and loss account (iv ) Cash account 7. Voucher is prepared for: (i) Cash received and paid (ii ) Cash/Credit sales (iii ) Cash/Credit purchase (iv) All of the above 2.78 Test Your Understanding . 6. A purchase of machine for cash should be debited to: (i) Cash account (ii ) Machine account (iii ) Purchase account (iv ) None of these 5.

Give a specimen of an account. Are debits or credits listed first in journal entries? Are debits or credits indented? 5. These rules are summarised as follows : Books of Original entry : The transactions are first recorded in these books in a chronological order. cash memos. Why is the evidence provided by source documents important to accounting? 3. 2. vouchers. Journal is one of the books of original entry. Rules of debit and credit : An account is divided into two sides. The left side of an account is known as debit and the credit. Posting is process of transferring entries from books of original entry to the ledger. Debit and Credit both represent either increase or decrease. Why are some accounting systems called double accounting systems? bl Credit Decrease Increase Increase Increase Decrease is he Summary with Reference to Learning Objectives d . depending on the nature of an account. State the three fundamental steps in the accounting process. Ledger : A book containing all accounts to which entries are transferred from the books of original entry. The process of recording entries in the journal is called journalising. Should a transaction be first recorded in a journal or ledger? Why? 4. which form the basis and evidence of a business transaction recorded in the books of account.I Key Terms Introduced in the Chapter • • • • • Source Documents Accounting Equation Books of Original Entry Journalising and Posting Double Entry Book Keeping· • • • • • Credit Debit Account Ledger Journal 79 1. 6. 3.Recording of Transactions . bills. 5. Meaning of accounting equation : A statement of equality between debits and credits signifying that the assets of a business are always equal to the total liabilities and capital. Meaning of source documents : Various business documents such as invoice. The rules of debit and credit depend on the nature of an account. are called source documents. Questions for Practice Short Answers 1. © no N C tt E o R be T re pu Name of an account Assets Liabilities Capital Revenues Expenses Debit Increase Decrease Decrease Decrease increase 4. 2.

is the decrease recorded as a debit or as a credit? d .000 = Rs. Numerical Questions © no N C tt E o R be T re pu 2.09. Prepare accounting equation on the basis of the following : (a) Harsha started business with cash Rs. 12.000 Analysis of Transactions 1.000 + Goods Rs.000 (b) Purchased goods from Naman for cash Rs. Long Answers 2. What is a journal? Give a specimen of journal showing at least five entries.000.000 (c) Sold goods to Bhanu costing Rs.09. Accounting equation remains intact under all circumstances.2. 35. 5. 2.000 + Debtors Rs.00. 30. What is the purpose of posting J.F numbers that are entered in the journal at the time entries are posted to the accounts. Describe how debits and credits are used to analyse transactions. Justify the statement with the help of an example.000/Rs.000 + Capital Rs.000 + Furniture Rs.000 (Ans: Asset = cash Rs. (c) record drawings (d) record the fresh capital introduced by the owner.50000 (b) He purchased furniture for cash Rs.000 = Rs. Describe how accounts are used to record information about the effects of transactions? is 1. 7.10. 6. 7. Prepare accounting equation from the following: (a) Kunal started business with cash Rs. Why are the rules of debit and credit same for both liability and capital? 8. 1. Differentiate between source documents and vouchers. is the decrease recorded as a debit or as a credit? If the transaction has the effect of decreasing a liability.000 (d) Bought furniture on credit Rs. 12. 7.02.000) bl 3. 9. Liabilities = Creditors Rs. Describe the events recorded in accounting systems and the importance of source documents in those systems? he 10. If a transaction has the effect of decreasing an asset. Explain the double entry mechanism with an illustrative example. 2. What entry (debit or credit) would you make to: (a) increase revenue (b) decrease in expense. 7.60. 2. 4.2. 40.80 Accountancy 7.

000 + Goods Rs. 1. 1. 1.000 Rs.000 + Goods Rs.000 Rs. 35.000 Rs.000 Rs.000 Rs.500) (d) Purchased furniture for office use (e) Cash paid to Rohit in full settlement (f) Cash received from Manish (g) Rent paid (h) Cash withdrew for personal use © no N C tt E o R be T re pu 4. Use accounting equation to show the effect of the following transactions of M/s Royal Traders: Rs.000 d (Ans: Asset = Cash Rs. 40.000 Rs.77. 26. 50.1.000 (h) Commission received in advance (a) Started business with cash (b) Purchased goods for cash (c) Rent received (d) Salary outstanding (e) Prepaid Insurance (Ans: Cash Rs.000 = Rs.000) for cash Rs.20. 2.000 + Capital Rs.000= Rs.500) Rs. 10.500 + Machine Rs.000 Rs.500.33. 72.000 + Furniture Rs. 1.94. 4. 20. 15.39.000 Rs.500) 5. Rohit has the following transactions : (a) Commenced business with cash (b) Purchased machinery on credit (c) Purchased goods for cash (d) Purchased car for personal use (e) Paid to creditors in full settlement (g) Paid rent (f) Sold goods for cash costing Rs. 2. 20. 40.000 + Capital Rs.000 81 3. 80.000) . Liabilities = Creditors Rs.000 + Goods Rs.500 = Rs. 1. 17. 40.000 bl is Rs.50.I (c) He paid commission (d) He purchases goods on credit (e) He sold goods (Costing Rs. Mohit has the following transactions.000 Prepare the Accounting Equation to show the effect of the above transactions on the assets.000 he Rs. Liabilities = Commission Rs.500 Rs. 2. 2. 1.000 Rs. 70. 20.000 Rs. 2.000 Rs. 3. liabilities and capital.000 Rs.1.75.000 Rs.54.000 = Rs. 1.75.000 = Rs. 2. 40. 2.94.000. 20. 48. (Ans: Assets = Cash Rs.20.000 Rs. 32.000 Rs. 2. Liabilition = Capital Rs. 5. 72. 10.000 Rs. prepare accounting equation: (a) Business started with cash (b) Purchased goods from Rohit (c) Sales goods on credit to Manish (Costing Rs.500 Rs. 38. 5.500 + Furniture Rs. 17.000 Rs.Recording of Transactions .500. 10.

5.000 Rs. 1.000 Rs.500 + Prepaid insurance Rs. 50.92. 7.000) (i) Deposited into bank (h) Cash paid to Ragani (a) Manoj started business with (i) Cash (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) Rs. 5.10. 2.000 Rs. 20.000.000 (Ans : Assets = Cash Rs. 5. 2. 700 Rs.000 Rs.000 Rs. 3.92.26. 25.000 Rs. 10. 30.000 bl is he d .000 Rs.32. 20. 1.000) 7. 1. 5.15.000 Rs. Show the effect of following transaction on the accounting equation: Rs.000 Rs.000 (Ans: Assets = Cash Rs.000.700 + Goods Rs.000 = Rs.00.000 + Bank Rs.000 = 6.20. 1.000 = Rs. 5. 14.32. 7.000 Rs. 2.200) 6. 1. Liabilities = Capital Rs. 30. 25. 6. 37. Show the effect of the following transactions on Assets.000 + Rent Rs.000 Rs. 5. 36.000 Rs.000 Rs.30. 4.000 + Shares Rs.000 + Outstanding Rent Rs. Liabilities = Outstanding salary Rs.000 + Goods Rs. 2.000 + Building Rs.15. 8. 20.000 Rs. 00. Liabilities and Capital through accounting equation: Rs.000) (h) Goods destroyed by fire Accountancy Rs.000 Rs. 1.000 + Goods Rs.000 + Debitors Rs.00. 5.25. 1. 5.82 (f) Received interest (g) Sold goods for cash (Costing Rs. 1.000 Rs. 50. 1.000 Rs.22. 500 (Ans: Assets = Cash Rs. 6. 35. 50.000) 8.000 + Capital Rs. 000 Rs.75.000 Rs.000) Paid insurance premium Rent outstanding Depreciation on building Cash withdrawn for personal use Rent received in advance Cash paid to himani on account Cash received from Ashu © no N C tt E o R be T re pu (a) Started business with cash (c) Invested in shares (b) Rent received (d) Received dividend (e) Purchase goods on credit from Ragani (f) Paid cash for house hold Expenses (g) Sold goods for cash (costing Rs.000 Rs.000 + Capital Rs. 35. Show the accounting equation on the basis of the following transaction: (a) Udit started business with: (i) Cash (ii) Goods Purchased building for cash Purchased goods from Himani Sold goods to Ashu (Cost Rs.000: Laibilities = Creditors Rs. 20.

2. 10.000 Debtors Rs. 6. 100 Rs.20. 5. 50.000 Rs.000 Rs. 13.90.000 Rs. 60. Liabilities = Outstanding Rent Rs. 5.000 + Creditor Rs.000 d .200.00.000 Rs.000 + Goods Rs. 2005: bl is Rs. 10.43. 10.000 Rs.000 he Rs. Rs.000) Show the effects on Assets.000= Rs. 78. 55. Liabilities = Capital Rs. 1. (a) Business started with cash (b) Purchased goods for cash (c) Purchase furniture from R. 10.000 + Furniture Rs. 20. 000 Rs. 2.000 Rs. 5. 3.000 Rs.000 = Rs.000 83 (iii) Building (b) He purchased goods for cash (c) He sold goods(costing Rs. 9. furniture in full settlement (g) Cash sales (costing Rs. 52. 2. 50.000 Rs.10.000 Rs. 33.000 Rs.9. 3.Recording of Transactions .700 Rs.K.000 (Ans: Asset = cash Rs. 12. Liabilities and Capital with the help of accounting Equation. 59. Transactions of M/s Vipin Traders are given below.000) (f) He paid cash to Rahul in full settlement (g) Salary paid by him (h) Received cash from Varun in full settlement (i) Rent outstanding (j) Prepaid Insurance (k) Commission received by him (l) Amount withdrawn by him for personal use (m) Depreciation charge on building (n) Fresh capital invested (o) Purchased goods from Rakhi © no N C tt E o R be T re pu 9.000 Rs.200 + Goods Rs.K.000 Rs.000) (d) He purchased goods from Rahul (e) He sold goods to Varun (Costing Rs. Rs.1.000 + Prepaid Insurouce Rs.64.I (ii) Goods Rs. 5674) (e) Paid cartage (f) Cash Paid to R. 7.000 = Rs.000 Rs. 4. 1. Furniture (d) Sold goods to Parul Traders (Costing Rs.000 + Capital Rs.000 vide bill no. 1.000) (h) Rent received (i) Cash withdrew for personal use (Ans: Assets = Cash Rs.42.30. 2.000 Rs.000 +Building Rs.200) 10. 35.000 Rs. 9.000 Rs. 3.00. 20. 53. 50.000 Rs.25.77.77. Bobby opened a consulting firm and completed these transactions during November. 1.

84 Accountancy (a) Invested Rs.12 Dec.00 salary to the office manager. Enter the following Transactions in the Journal of Mudit : Jan. (g) Provided services to a client and collected Rs.000 1. long term payables.000 (h) Paid Rs.50.000.000 cash and a long term note payable for Rs.000 75.18 Dec. (c) Purchased office supplies on credit for Rs.00. 93.000 payment from the client created in transaction k.500 Rs. © no N C tt E o R be T re pu (m) Bobby withdrew Rs.000 1. 4.01 Commenced business with cash Building Goods purchased for cash Jan.01 Business started with cash Purchased goods for cash Sold goods to Swati Purchased furniture Paid rent Dec. (e) Purchased for Rs. The purchase price was price was paid with Rs.75.09 Dec.01 Jan.000 cash and office equipment with Rs.02 (k) Completed services of a client for Rs. Journalise the following transactions in the books of Himanshu: Rs. (f) Paid Rs. land.07 Dec.00.000. 12.000. Analyse the above stated transactions and open the following T-accounts: Cash.000 1.30 2011 Cash received from Swati In full settlement Paid salary 12. withdrawals.000 from the business. 3.00.000. (l) Received Rs. 50. 2.25 Dec. (i) Paid supplier created in transaction c. is he d . (d) Bobbie transferred title of motor car to the business. office supplies. The land was worth Rs. 4.000 cash and trading in old equipment with a recorded cost of Rs. (b) Purchased land and a small office building. 1. salary. 1. This amount is to be paid within 30 days. 26. 11. The motor car was worth Rs. client.50. 1.000 3. 7. 30. building. Journalising 2010 Dec.000 and the building worth Rs. 19.000 5.000 additional office equipment on credit.000 4.000. expense and utilities expense. 75.000 10. 90. capital.000 for the month’s utilities.000.00.000 bl (j) Purchase new office equipment by paying Rs. motor car. 75.000 in a business called Bobbie Consulting. 30. 8. 20.

: (c) Charge depreciation @ 10% p.22 Jan.16 Dec. 02 Dec.04 Jan.a for two month on machine costing Rs.000 2.1.000 5.000 26.13 Dec. for 9 months.22 Dec.50.14 Jan. bl is 300 Rs.000 10.000 2.000 29.000 were used by the proprietor.18 Jan.I Jan.2.000 10. 1.500 500 10. (b) Goods worth Rs.000 30.10 Hema started business with cash Open a bank account with SBI Purchased goods from Ashu Sold goods to Rahul for cash Sold goods to Suman Discount allowed 30.000 40.000 16.000 1.30.12 Jan.31 Paid telephone expenses by cheque (a) Rs.000 15.000 500 10. 1.000 20. 01 Dec.28 Dec.03 Jan.500 85 © no N C tt E o R be T re pu Bought goods from Tara for cash Received cheque from Suman Dec.000 700 500 27.29 Dec. 04 Dec.20 Jan. Jouranlise the following transactions in the books of Harpreet Bros.200 4.26 Dec.Recording of Transactions .06 Dec.20 Cheque given to Ashu on account Rent paid by cheque Deposited into bank Trade expenses Dec.000 due from Rohit are now bad debts.06 Jan.000 19.10 Jan.25 Machine purchased from Parigya Cheque issued to Parigya Paid salary Dec.23 Dec.500 he 1. Journalise the following transactions: 2010 Dec.25 Sold goods to Ramesh Paid wages Sold goods for cash Paid for trade expenses Cash received from Ramesh Discount allowed Goods purchased for Sudhir Cartage paid Drew cash for personal use Goods use for house hold Cash paid to Sudhir Discount allowed 13.000 20.000 at 6% p.a. 14.000. (d) Provide interest on capital of Rs.00.700 d .000 2.

500 6. when total capital were (d) Received Rs. He pays me a compensation of 45 paise in a rupee. 2.700 7.000 200 15.65. Nov. 2. 70. Nov. 15.000 (h) Sudhir Kumar who owed me Rs. Journalise the following transactions is the journal of M/s Goel Brothers and post them to the ledger.000 12. he Rs.000 30.000 (i) Commission received in advance Posting 2010 16.000 Rs.000 5. 03 Nov. Prepare Journal from the transactions given below : (a) Cash paid for installation of machine (b) Goods given as charity (c) Interest charge on capital @7% p. 13 15 18 20 22 25 Nov.800 200 3. 2011 bl Rs.a.000 200 1. 10 Nov. 30 Cartage paid Rent paid Received cash from Nitesh Discount allowed Salary paid Jan.000 a final dividend of 60 paise in a rupee is received from his estate. 1.1. 900 d .000 1.000 50.200 of a bad debts written-off last year. 26 Nov. 2.86 Accountancy (e) Rahul become insolvent. 500 Rs. 29 Nov.000 15.000 Rs. post to the ledger: Nov. 01 Started business with cash Cash sales Deposited into bank Drew cash for personal use Cash paid to Harish in full settlement of account Good sold to Nitesh 17.000 5. 1. 08 Nov. 27 Nov.000 14. 1. 7. (e) Goods destroyed by fire (f) Rent outstanding (g) Interest on drawings Rs.000 has failed to pay the amount. Cash paid to Harish on account Nov. who owed is Rs. 01 Business started with (i) Cash Purchased goods from Harish Purchase furniture for cash Paid sundry expenses © no N C tt E o R be T re pu (ii) Goods Nov. Nov. Journalise the following transactions.000 is Rs. 3. Nov.50. 05 Sold goods for cash Nov.000 Rs.000 Rs.

Jan.000 he d .000 4.000 50.000 2.000 11. 18 20 22 23 24 26 27 28 29 30 Opened bank account in PNB Goods purchased from Tara Goods purchased for cash Goods sold to Naman Cash paid to tara Cash received from Naman Discount allowed Paid wages Furniture purchased for office use withdrawn from bank for personal use Issued cheque for rent goods issued for house hold purpose drawn cash from bank for office use Commission received Bank charges Cheque given for insurance premium Paid salary Cash sales 80. 25.000 19. 18.000 4. 16. Opened bank account with H.000 22. 22. Commenced business with cash 2. 92.000 40. Jan.000 12.000 60. 16 Jan. 8.D. 15 Jan.000 87 © no N C tt E o R be T re pu August 2010 1.C. Gupta Traders Rent paid Paid trade expenses Received cash from Gupta Traders Goods return to Hema Traders Cash paid to Hema Traders Bought postage stamps Paid salary to Rishabh 1. Jan.000 30. Started business with cash 2. Jan.000 30.000 Rs. 10.10.000 100 4. 2010 bl is 1.000 12. Jan. Deposited into bank 18 Give journal entries of M/s Mohit traders. 30.000 12.000 200 3.000 6. December. 10 Jan. 23. 02 Jan.000 30.000 2. Purchased furniture Bought goods for cash from M/s Rupa Traders Purchased good from M/s Hema Traders Sold goods for cash 14. 7. 3. 1. Journalise the following transaction in the Books of the M/s Bhanu Traders and Post them into the Ledger. 08 Jan. Jan.000 1.Recording of Transactions .000 42. 05 Jan. Post them to the Ledger from the following transactions : Rs.000 20. 04 Jan.000 22. 20.700 300 200 5. Jan.000 10.I Jan. Jan.000 3. Sold goods on credit to M/s.F.000 7. Jan.

000 30.000 20.50.00. 14.000 1. 26.00. 20.50. 19. 29. 26. 16. 18.000 3.000 28. 2.000 3.000 3. 3. 6.000 30.000 1. Cash sales Dec. Sold goods for cash Cheque given to Himani Goods sold to M/s Goyal Traders. Bought office furniture Paid into bank to open an current account Purchased a computer and paid by cheque Bought goods on credit from Ritika Cash sales Sold goods to Karishna on credit Cash paid to Mansi on account Goods returned to Ritika Stationery purchased for cash Paid wages 9. 15. 22.000 31. Purchased goods from cash 8. 24. 12.000 60. Journalise the following transaction in the books of Sanjana and post them into the ledger : bl 20. Rent paid by cheque 29. 21.500 20.000 he d . 8.000 31.000 36.000 20. 2010 1. Purchased goods on credit from Meena Traders 30.000 15.000 2.000 8. 17.000 4. Started business with cash 21.000 3.000 3. is Rs. 30.88 4.000 3.000 2. Drew cash from bank for personal use Goyal traders returned goods Cash deposited into bank Cheque received from Goyal Traders Goods given as charity Rent paid Salary paid Accountancy 40. Also post them in the ledger.500 2. 14. Office machine purchased for cash © no N C tt E o R be T re pu 2.000 7.000 2.000 20. Journalise the following transaction in the Book of M/s Beauti traders. Goods returned by Karishna Cheque given to Ritika Cash received from Karishna on account Insurance premium paid by cheque Cheque received from Karishna 28.000 30. Returned goods to Himani 10.000 25.000 2. Bought goods on credit from Himani 6.000 14. 22. 28. 5.000 4.

decreases by drawings and net loss).000 40. 3 (No).000 10. Sold goods to Karuna 4. 25. 4 (ii) 1. Liabilities increases Asset decreases.000 15. 8.000 8.II 1. Expenses and Liabilities increases. Salaries account and cash account.000 10. 26.000 3. 4. Cash sales 6. Asset increases Asset decreases. 6. Loan account and Bank. (iii). Goods sold to Heena Purchased goods from Rupali Goods returned from Karuna Cash received from Karuna Cheque given to Rohan Cash received from Heena Cheque received from Tarun Cheque received from to Heena Cash given to Rupali Paid cartage Rs. 16.000 2. Assest increase and capital increase.000 12. 10.000 1. Assets and Revenues. 5. 2 (Capital increases by net profit and fresh capital introduced. Purchase account and Remesh account.000 500 89 © no N C tt E o R be T re pu Paid salary Cash sale Cheque given to Rupali Sanjana took goods for Personal use 31. Assets and Revenues increases. Expense and Assets. 27. Cash in hand Cash at bank Stock of goods Due to Rohan Due from Tarun 3. 30. 3.000 2. 2011 1.000 6. Assets and Liabilities. 6. 22. 14. Furniture account and Cash account. Paid General expense Checklist to Test Your Understanding Test Your Understanding .000 13. 29.000 10. 15.000 6.000 5. 28.Recording of Transactions .I Test Your Understanding . Expenses and Liabilities. Liability and Asset.000 30.000 55.000 4. bl is he d . 2. 20. Cash account and capital account.I January. Cash account and sales account. Expenses increases Assets decreases.000 7.000 18.

Sarita account and Sales account. 8. 7(a) Test your understanding . 5(d). 9. Expense and Assets. 2(d). 2. 5 (iii). © no N C tt E o R be T re pu bl is 9 (iii). Creditors 3. 6 (iv). 7 (iv).V 1 (iv). 4(b). Assets decreases Revenue decreases. Ramesh account and Cash. 2 (i). liabilities and Assets. Expenses increases Assets decreases. 3(b). Asset and Revenue. he d . Office stationary 8 (iv).90 Accountancy 7. Liabilities decreases Assets increases. Rent account and Cash account. 3 (i). Test Your Understanding . Machine 7. Rent 4. 4 (ii). Debtors 5.III 1(d). Cash 6. 6(c). Debtors Test Your Understanding .IV 1.

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